Sacred Heart Hosp. of the Hosp. Sisters of the Third Order of St. Francis v. Marshfield Clinic Health Sys., Inc.

• Decision Date: 20 November 2018
• Docket Number: Appeal No. 2017AP1998
• Citation: 923 N.W.2d 174 (Table),385 Wis.2d 211,2019 WI App 1
• Parties: SACRED HEART HOSPITAL OF THE HOSPITAL SISTERS OF THE THIRD ORDER OF ST. FRANCIS, Plaintiff-Appellant, v. MARSHFIELD CLINIC HEALTH SYSTEM, INC., Marshfield Clinic, Inc. and MCHS Hospitals, Inc., Defendants-Respondents.
• Court: Wisconsin Court of Appeals

385 Wis.2d 211

923 N.W.2d 174 (Table)

2019 WI App 1

SACRED HEART HOSPITAL OF THE HOSPITAL SISTERS OF THE THIRD ORDER OF ST. FRANCIS, Plaintiff-Appellant,

v.MARSHFIELD CLINIC HEALTH SYSTEM, INC., Marshfield Clinic, Inc. and MCHS Hospitals, Inc., Defendants-Respondents.

Appeal No. 2017AP1998

Court of Appeals of Wisconsin.

DATED AND FILED November 20, 2018

PER CURIAM.

¶1 Sacred Heart Hospital of the Hospital Sisters of the Third Order of St. Francis ("Sacred Heart") appeals an order denying its motion for a temporary injunction and a grant of summary judgment in favor of Marshfield Clinic Health System, Inc. ("MCHS"); Marshfield Clinic, Inc. ("Marshfield Clinic"); and MCHS Hospitals, Inc. ("MCHS Hospitals") (collectively, the "Marshfield Entities"). Sacred Heart argues the circuit court erred by dismissing its claims for breach of a right of first refusal and of a land use restriction associated with lands Sacred Heart sold to Marshfield Clinic at various times. Sacred Heart also challenges the dismissal of its claim for breach of the implied duty of good faith and fair dealing and the denial of its motion for a temporary injunction. We reject each of its arguments and affirm.

BACKGROUND

¶2 Sacred Heart is a nonprofit Wisconsin corporation that provides healthcare services to the Chippewa Valley community, including through a hospital located in Eau Claire. MCHS, Marshfield Clinic, and MCHS Hospitals are affiliated nonprofit Wisconsin corporations that also provide healthcare services.¹ Since 1987, Sacred Heart and the Marshfield Entities have collaborated in certain limited capacities in providing healthcare services.

¶3 In late 1997, Sacred Heart and Marshfield Clinic entered into a Real Estate Purchase and Sale Agreement (the "1997 Agreement"). Under the 1997 Agreement, Sacred Heart agreed to sell to Marshfield Clinic 6.04 acres of vacant real property near Sacred Heart’s existing hospital. As part of the 1997 Agreement, Marshfield Clinic agreed to enter into a later-recorded "Declaration of Land Use Restriction and Grant of Right of First Refusal and Option" (the "1998 Declaration"). Among other things, the 1998 Declaration granted Sacred Heart a right of first refusal to purchase any portion of the real property subject to the 1997 Agreement for which Marshfield Clinic received an offer to purchase. Marshfield Clinic subsequently built a clinic and pharmacy on the land it purchased from Sacred Heart, which the parties refer to as the "Clinic Parcel."

¶4 Also in 1997, Marshfield Clinic purchased a 2.58-acre parcel of vacant land adjacent to and immediately south of the Clinic Parcel. The property was purchased from the Eau Claire McGuire Agency and is known as the "McGuire Parcel." Sacred Heart has not, at any time, held title to or had any other legal interest in the McGuire Parcel. The Clinic Parcel and the McGuire Parcel were combined into a single parcel in 2006.

¶5 In 2006, Marshfield Clinic entered into discussions with Sacred Heart about purchasing an additional amount of Sacred Heart’s real estate, which the parties refer to as the "Parking Lot Parcel." The real property at issue was a 6.8-acre lot located directly across Craig Road to the east of the existing clinic. Marshfield Clinic documented its plans to construct an addition to the existing clinic, including an ambulatory surgery center and an imaging center, but it advised Sacred Heart that the addition would not be built to hospital specifications and it did "not intend to operate a licensed hospital as part of [its] operations on th[e] site." Marshfield Clinic stated it was interested in the lot to provide additional parking for the clinic.

¶6 Sacred Heart accepted Marshfield Clinic’s offer to purchase the Parking Lot Parcel in May 2006 (the "2006 Agreement"). As part of the sale, the parties entered into a "Declaration of Land Use Restriction" in June 2006 (the "2006 Declaration"). Among other things, the 2006 Declaration prohibited Marshfield Clinic and its successors-in-interest from "construct[ing], locat[ing], operat[ing], or provid[ing]" a hospital "on or from" the Parking Lot Parcel.

¶7 Ten years later, in 2016, MCHS Hospitals purchased real property from Gateway Properties Midwest, LLC, for the purpose of constructing a cancer

center and hospital (the "Hospital Parcel"). The 7.23-acre Hospital Parcel is located immediately to the south of the McGuire Parcel, and across Craig Road to the west of the Parking Lot Parcel. Later, MCHS publicly announced that it had submitted a site plan to the City of Eau Claire for a proposed forty-four-bed hospital on the Hospital Parcel.

¶8 Marshfield Clinic and MCHS Hospitals executed certain agreements in preparation for the construction of the hospital and cancer

center. In January 2017, Marshfield Clinic and MCHS Hospitals entered into a "Cross Access and Parking Agreement" (the "Parking Agreement"), which the City of Eau Claire required as a condition for its approval of the site plan for the cancer center. The Parking Agreement granted to MCHS Hospitals a non-exclusive easement permitting cancer center staff and visitors to use portions of what the parties designated the "Marshfield Parcel."² The "Marshfield Parcel," according to the legal description provided, is apparently synonymous with the McGuire Parcel. See infra ¶ 20 n.5. It is undisputed that the Parking Agreement does not provide MCHS Hospitals with any access or parking rights on the Clinic Parcel or Parking Lot Parcel. The easement area affected by the Parking Lot Agreement exists entirely within the McGuire Parcel.

¶9 Marshfield Clinic and MCHS Hospitals also executed a "Drainage Easement Agreement (the "Drainage Agreement") at the City of Eau Claire’s request. The Drainage Agreement provided MCHS Hospitals with the rights to construct a drainage system and discharge water from the Hospital Parcel onto certain areas of the "Marshfield Parcel." However, like the Parking Agreement, the Drainage Agreement does not provide MCHS Hospitals with any right to use the Clinic Parcel or the Parking Lot Parcel. The easement area affected by the Drainage Agreement exists entirely within the McGuire Parcel. The following map, excerpted from a record exhibit, shows all the parcel designations and their configuration, as well as the easement area:

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Sacred Heart’s hospital is located on property just east of the properties depicted in the map.

¶10 In March 2017, Sacred Heart filed this action, asserting claims for declaratory judgment, breach of contract, and breach of the implied duty of good faith and fair dealing. Sacred Heart asserted that Marshfield Clinic’s granting of parking and drainage rights over the "Marshfield Parcel" constituted a "transfer" of property, thereby triggering Sacred Heart’s right of first refusal with respect to the Clinic Parcel. Accordingly, Sacred Heart asserted Marshfield Clinic had breached the 1998 Declaration by failing to offer Sacred Heart a right of first refusal for the easements on the McGuire Parcel adjacent to the Clinic Parcel. Sacred Heart also claimed the Marshfield Entities’ expanded campus—now consisting of the existing clinic, the cancer

center, and the hospital—would require no less than 844 parking spaces, and it was inevitable that the Marshfield Entities would satisfy this parking demand through the use of the Parking Lot Parcel. Sacred Heart therefore asserted that the Marshfield Entities’ "plans to build a hospital and cancer center on the [Hospital Parcel] will necessarily cause it to violate" the 2006 Declaration’s land use restriction. Finally, Sacred Heart alleged the Marshfield Entities’ decision to build a hospital was in bad faith and contrary to the parties’ intentions when they entered into the 2006 Agreement. As relief, Sacred Heart requested that the circuit court permit it to exercise its right of first refusal over the parking and drainage easements, and to either order rescission of the 2006 Agreement transferring the Parking Lot Parcel or award damages for Marshfield Clinic’s breach of that agreement.

¶11 Sacred Heart filed a motion for a temporary injunction halting construction of the cancer

center and hospital. The Marshfield Entities then moved for summary judgment on all of Sacred Heart’s claims. The circuit court denied Sacred Heart’s motion for a temporary injunction and granted the Marshfield Entities’ summary judgment motion, dismissing all of Sacred Heart’s claims. Sacred Heart now appeals.

DISCUSSION

¶12 We review a grant of summary judgment de novo. Tews v. NHI, LLC , 2010 WI 137, ¶ 40, 330 Wis. 2d 389, 793 N.W.2d 860. The summary judgment methodology is well established. Id. , ¶ 41. We first examine the pleadings to determine whether claims have been stated. Id. If so, we examine the moving party’s submissions to determine whether it has made a prima facie case for summary judgment. Id. If a prima facie case for summary judgment exists, we examine the opposing party’s affidavits and other proof to determine whether summary judgment is appropriate. Id.

¶13 Summary judgment must be granted when there is no genuine dispute of any material fact and the moving party is entitled to judgment as a matter of law. WIS. STAT. § 802.08(2) (2015-16).³ "The purpose of the summary judgment procedure is to avoid trials when there is nothing to try." Tews , 330 Wis. 2d 389, ¶ 42. In reviewing the parties’ submissions, we draw all reasonable factual inferences in the light most favorable to the nonmoving party. Pum v. Wisconsin Physicians Serv. Ins. Corp. , 2007 WI App 10, ¶ 6, 298 Wis. 2d 497, 727 N.W.2d 346. Whether an inference is reasonable and whether more than one inference may be drawn are questions of law. Id.

A. The circuit court properly dismissed Sacred Heart’s claims related to the right of first refusal in the 1998 Declaration.

¶14 We begin with Sacred Heart’s assertion that Marshfield Clinic’s conveyance of easements to MCHS Hospitals for parking and drainage over the McGuire Parcel...